How Historic OPEC Agreement Will Affect Oil Price

OPEC's efforts are likely to balance the oil market by mid-2017, but production cuts fall short of the stated target of depleting oil reserves, which are weighing on prices.

The oil market should rebalance "by the middle of next year," according to the Nigerian minister. However, calculations based on OPEC data indicate that the overall decline in record oil reserves will not be enough during 2017.

“Even with 100 percent compliance by both OPEC and non-OPEC oil producers, world stocks are unlikely to fall in the first half of 2017,” said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd. in London. "It could keep oil prices down."

Oil prices could rise to $ 60 to $ 70 a barrel if the Organization of the Petroleum Exporting Countries manages to bring stocks back to normal levels, Venezuelan oil minister Eulogio del Pino said. The omens for achieving this goal are mixed.

The OPEC Group will provide 80 percent of the promised cuts. While Russia has pledged to come up with a 300,000 bpd cut in the first half of 2017, other non-OPEC producers such as Mexico, Azerbaijan and Colombia are likely to keep the promise. This scenario would leave largely unchanged the 300 million barrels of world surplus reserves believed, as Del Pino and his colleagues did.